total annual return answer is between (88875-89675) amount invested in automobil
ID: 2785103 • Letter: T
Question
total annual return answer is between (88875-89675)
amount invested in automobile loans
amount invested in furnuture loans
amount invesed in other secured loans
amount invested in signature loans
amount invested in "risk free" securities
Investment and Loan Planning. The employee credit union at State University is planning the usage of funds for the coming year. The credit union makes four types of loans to its members. In addition, it invests in ‘risk-free" securities in order to stabilize income. The various revenue-producing investments together with annual rates of return are as follows: Annual Rate of Return (%) | Type of Loan/Investment Secured Loans Automobile Furniture Other Secured Loans Signature Loans “Risk Free Securities Ao co ou State laws and credit union policies impose the following restrictions on the composition of the credit union's loans and investments: 1. "Risk-Free" securities may not exceed 30% of the total funds. 2. Signature loans may not exceed 30% of total loans 3. Furniture loans plus “other secured loans” may not exceed 50% of the total of the three types of secured loans 4. Signature loans plus “other secured loans" may not exceed the amount invested in “Risk-Free” securities. If the firm projects $1,500,000 available for loans and investments during the coming year, how should the funds be allocated to each of the investment alternatives in order to maximize total annual return?Explanation / Answer
Let the amount in automobile loans be x, furniture loans be y, other secured loans be z, signature loans be a, risk free securities be b
Total return=x*5%+y*6%+z*8%+a*9%+b*4%
x+y+z+a+b<=1500000
a<=0.3*(x+y+z+a)
y+z<=0.5*(x+y+z)
z+a<=b
It is not clear from the question that funds mean 1500000 or the total loans + risk free
b<=1500000*0.3 or b<=0.3*(x+y+z+a+b)
In either case,
Solution=
Annual return=89475
x=367500
y=232500
z=135000
a=315000
b=450000
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